ActBlue acts out against their own lawyers and former staffers

Behemoth Democratic fundraising platform ActBlue was recently accused of having lied to Congress during an investigation into ActBlue’s lax anti-fraud protections. In a frantic press release, which spent several paragraphs grandstanding about democracy, ICE, and healthcare costs, ActBlue denied the allegations, calling them “politically motivated” misrepresentations meant to “keep us away from the important work at hand.”

Who would be so audacious as to fabricate a story just to sabotage ActBlue? Perhaps a right wing media outlet, or Republican operatives?

Not exactly.

The accusation came from ActBlue’s own lawyers (who were later fired or resigned) and was reported in the New York Times with half a dozen former ActBlue employees acting as sources.

What happened?

ActBlue’s version of the story, which it titled “The Unfiltered Truth” is fairly simple, and not in a good way.

They claim ActBlue’s internal legal department and external council wrote and approved statements for CEO Regina Wallace-Jones to sign in response to “a politically motivated inquiry” from Congress. Then, 460 days later, their lawyers changed their minds for no apparent reason and told ActBlue that some malicious actors might take the statements out of context to try and say that ActBlue had lied to Congress, whether that was true or not. At this point, ActBlue claims Wallace-Jones immediately informed the board and soon hired new outside council, at which point its former lawyers and employees (whose departures from and reasons for leaving ActBlue are not mentioned) began “offering one-sided information to the press” to create a “narrative” of “chaos” and “wrongdoing.”

The NYTImes tells a much more detailed and believable story.

Based on memos, resignation letters, screenshots, and information from “half a dozen former ActBlue employees,” their version of events begins the same way, with Covington & Burling, ActBlue’s elite DC law firm, drafting and approving Wallace-Jones’s statements to congress. The statements allegedly included details about a “multilayered” screening process ActBlue was supposedly using to block illegal foreign donations from being made through their platform. Then, over a year later, Covington & Burling apparently found out that ActBlue had given them inaccurate information and that “some of the steps she had described” in the screening process, “were not always followed.” It was at this point that the firm drafted two memos explaining that they were now concerned that ActBlue might be subject to criminal investigation because of the facts they had concealed, far from the inexplicable and sudden about-face that ActBlue tried to portray as in its press release.

The memos, which the NYTimes quoted from often, do not sound anything like the over-cautious worry-mongering that ActBlue’s statement implies. “It can be alleged that ActBlue accepted and/or facilitated the acceptance of foreign-national contributions into American elections,” Covington & Burling wrote, “In addition, because ActBlue’s staff was aware that its system was not as robust as necessary, it could be alleged that these violations were ‘knowing and willful,’ a standard that both increases the penalties the F.E.C. might seek and gives the Justice Department jurisdiction for a potential criminal investigation.”

The memos were so damning that they prompted a mass exodus of ActBlue’s leadership, which the NYTimes reported on last year, though the existence of the memos was not revealed at the time. Seven senior officials at the company ultimately departed within the span of a month including the associate general counsel (the general counsel himself could not resign because ActBlue didn’t have one, having fired him several months earlier).

Covington & Burling then specifically told CEO Wallace-Jones that her statements put her “at risk of having legal liability” and cautioned her to inform the board of the situation and retain legal counsel for herself. Two days later, one of ActBlue’s internal lawyers resigned citing concerns that leadership was trying to cover up legal compliance issues. The day after that, the last remaining lawyer in the general counsel’s office, Zain Aman, sent an email informing the board about the memos, a step that multiple NYTimes sources said Wallace-Jones had been resisting even though ActBlue maintains otherwise. By the end of the day Aman was locked out of his computers and he was placed on leave after posting “Please be advised that we have Anti-Retaliation and Whistleblower Policies for a reason,” to the company’s internal message board. ActBlue quickly deleted the message.

Only after all of that did ActBlue’s board finally convene and vote to fire Covington & Burling who they accused of “tardiness, unpreparedness, and counsel that bordered on malpractice.” As the NYTimes remarked: “It is highly unusual for a former client of a major white-shoe law firm like Covington to attack it publicly, as top ActBlue officials did,” and ActBlue’s entire (former) legal department does not seem to have agreed that it was Covington & Burling who was at fault either.

What Else is ActBlue Hiding?

As amazing as the NYTimes reporting on ActBlue’s meltdown is, it only covers the scandals related to ActBlue’s statements on foreign donation screening, which is just one of the topics investigators in congress and the DOJ have been looking into.

Straw Donors

Another major topic for investigators is ActBlue potentially facilitating “straw donors” or “smurfing” where a person or group conceals contributing a large amount of money to a candidate or PAC by splitting the money into many small donations and illegally attributing each of the donations to a long list of people whose identities the donor has stolen.

ActBlue has publicly called the possibility of straw donor schemes a “myth” but plenty of research exists showing highly suspicious patterns of “straw man” giving. In Connecticut, for example, five donors who allegedly donated hundreds of thousands of dollars through ActBlue, sometimes recording dozens of transactions per day, signed affidavits saying that they had not made those donations. The House Judiciary Committee’s initial report on the findings of the ActBlue Subpoena cited multiple instances of “straw donor” schemes occurring that ActBlue already knew about at the time it called them a “myth.” For example, as the report says, “In one thirty-day window in September and October 2024, ActBlue detected 237 separate donations made from foreign IP addresses using domestic prepaid cards—a leading indicator of fraud.” In another instance, “In June 2020, for example, one user informed ActBlue of $500 in donations made using a credit card that was stolen from him via pickpocket in Spain the previous year.”

Nonprofit Giving

ActBlue doesn’t just allow donors to give to PACs, it also processes donations to nonprofits through its 501(c)(3) and 501(c)(4) wings, ActBlue Charities and ActBlue Civics. Nonprofits, for the most part, aren’t required to disclose the identities of the donors they get their money from, but they are required to disclose the domestic organizations they give money to. Even the big bad “dark money groups” and donor advised funds fastidiously comply with this bare-minimum requirement … but not ActBlue.

Every year both of ActBlue’s nonprofit wings report spending zero, or nearly zero, dollars on charitable grantmaking despite taking in millions of dollars from donors for the explicit purpose of regranting it to other organizations. They do this by abusing a loophole in the tax code which allows them to list the donations as a liability in escrow rather than a grant since, they claim, they are merely processing a payment, not making a grant. This allows ActBlue to avoid disclosing the names of the vast majority of the organizations it is giving money to, even though donor-advised funds, which do functionally the same thing, have to disclose all of the money they disburse as a grant. Capital Research Center has been reporting on ActBlue’s abuse of this loophole since as early as 2020. In 2024 ActBlue Charities and Civics reported a combined $8.6 million in “Escrow or custodial account liability” while ActBlue Civics didn’t disclose a single grant and ActBlue Charities disclosed only $57,500 in grants to just two organizations.

Scratching the surface

The investigations into ActBlue are only just getting started and ActBlue’s attempts to control the narrative are already falling apart. They have now been reduced to accusing their own lawyers and the New York Times of lying in the same press release and there hasn’t even been a single charge announced yet. Meanwhile, it’s becoming clearer with each new report that the “grassroots” fundraising engine for the entire Democratic Party, which allegedly loathes dark money, was long aware that it was vulnerable to straw donor schemes and illegal foreign contributions and did nothing about it until prompted by congressional inquiries. And even then, its own former lawyers, both internal and external, seem to agree that they did not tell the whole truth about what they did or didn’t do to patch these vulnerabilities.

One can only imagine what will fall out of the ActBlue tree with a little bit more shaking, but one thing is for certain; it probably won’t be “The Unfiltered Truth.”

Source: https://capitalresearch.org/article/actblue-acts-out/